2014 (10) TMI 268 - HC - Customs

Interest on delayed refund - Held that - Court is unable to sustain the Tribunal s order because the amount became refundable to the respondent only based on the judgment of the Supreme Court dated 11-11-2003. Within three months, the respondent made application for refund and within the following two months, department granted refund. The claim for refund based on judgment of the Supreme Court is not comparable with refund on pre-deposit which is a deposit of duty or other demand paid for maintainability of appeal. When such amount paid or bank guarantee furnished is adjusted towards duty payable based on appellate order of the Tribunal, it ceases to be an amount of pre-deposit. So much so, the circular issued by the Board has no application. However, since Supreme Court judgment is binding judgment, it was the duty of the department to grant refund at least within three months from the date of judgment of the Supreme Court. To this extent, we uphold the claim of the respondent put forward before us by the counsel. We, therefore, hold that on general principles the assessee respondent is entitled to interest from 1st March, 2004 till the date of actual refund. - Decided partly in favour of Revenue.

Summary

Issues:
1. Applicability of interest on refund based on Tribunal's order.
2. Comparison between refund based on appellate judgment and pre-deposit.
3. Entitlement to interest on refund based on Supreme Court judgment.

Analysis:
1. The appeal challenged the Customs, Excise & Service Tax Appellate Tribunal's orders directing the department to grant interest on refund to the respondent. The department argued that the circular providing interest for refund on pre-deposit did not apply in this case as the amount involved was not a pre-deposit made during the appeal's pendency. The respondent had furnished a bank guarantee for the duty amount during the appeal before the Tribunal, which was encashed by the department when the appeal was dismissed. However, the Supreme Court later allowed the appeal, leading to a refund application by the respondent and the subsequent grant of refund. The Tribunal ordered interest on the refund based on the circular, but the High Court found that the circular did not apply in this scenario.

2. The High Court determined that the duty refunded based on the Supreme Court's judgment was not comparable to a refund on pre-deposit. The court highlighted that the amount became refundable only after the Supreme Court's judgment, and the refund application was made promptly within three months, with the department granting the refund within the following two months. The court emphasized that the circular's provisions on interest for pre-deposit did not apply once the amount paid or bank guarantee furnished was adjusted towards the duty payable based on the appellate order, as it ceased to be a pre-deposit amount. The High Court upheld the respondent's claim for interest based on the binding Supreme Court judgment, ordering the department to grant interest from a specified date till the actual refund date.

3. In conclusion, the High Court allowed the appeal in part, modifying the Tribunal's order by holding that the respondent was entitled to interest on the refund from a specific date until the actual refund date. The court clarified the distinction between refund based on an appellate judgment and a pre-deposit, emphasizing the timely application for refund following the Supreme Court's decision and the department's obligation to grant the refund promptly after the judgment.